Q3 2024 The Clorox Co Earnings Call - Q&A
Good day, ladies and gentlemen, and welcome to the Clorox Company third quarter fiscal year 2024 earnings release Conference call.
Operator: Good morning, ladies and gentlemen, and welcome to the Clorox Company's third quarter, fiscal year 2024, earnings release conference call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question and answer session. If you would like to ask a question, you may press star one on your touchtone pad at any time. If anyone should require assistance during the conference, please press the star zero on your touchstone pad at any time.
At this time all participants are in a listen only mode.
At the conclusion of our prepared remarks, we will conduct a question and answer session.
If you would like to ask a question you May press star one on your Touchtone pad at any time.
If anyone should require assistance during the conference. Please press star zero on your Touchtone pad at any time.
As a reminder, this call is being recorded.
Operator: As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Ms. Lisah Burhan, Vice President of Investor Relations. Ms. Burhan, you may begin your conference.
I would now like to introduce your host for today's conference call Ms. Lisa burner.
Lisa Burner: Vice President of Investor Relations.
Lisa Burner: For the Clorox company Ms. Baron. Thank you you may begin your conference.
Lisah Burhan: Good afternoon, and thank you for joining us. On the call today with me are Linda Rendle, our Chair and CEO, and Kevin Jacobsen, our CFO. I hope everyone has had a chance to review our earnings release and prepared remarks. Both of them are available on our website.
Lisa Burner: Good afternoon, and thank you for joining us on the call today with me are Linda Randall, our chair and CEO and Kevin Jacobsen our CFO.
Lisa Burner: Hope everyone has had a chance to review our earnings release and prepared remarks, both of them are available on our website.
Lisah Burhan: In just a moment, Linda will share a few opening comments, and then we'll take your questions. During this call, we may make forward-looking statements, including about our fiscal 2024 outlook. These statements are based on management's current expectations but may differ from actual results or outcomes. In addition, we may refer to certain non-GET financial measures. Please refer to the forward-looking statements section, which identifies various factors that could affect such forward-looking statements, which have been filed with the SEC.
Linda Rendle: Linda will share a few opening comments and then we'll take your questions.
Linda Rendle: During this call we may make forward looking statements, including about our fiscal 2024.
Linda Rendle: These statements are based on management's current expectations, but may differ from actual results are up.
Linda Rendle: In addition, we may refer to certain non-GAAP financial measures.
Linda Rendle: Please refer to the forward looking statements section, which identifies various factors that could affect such forward looking statements, which has been filed with the SEC.
Lisah Burhan: In addition, please refer to the non-GAAP financial information section of our earnings release and the supplemental financial schedules in the investor relations section of our website for reconciliation of non-GAAP financial measures to the most directly comparable GAAP. Now, I'll turn it over to Linda. Thank you for joining us today.
Linda Rendle: Please refer to the non-GAAP financial information section of our earnings release, and the supplemental financial schedules and the Investor Relations section of our website for a reconciliation of non-GAAP financial measures and the most directly comparable GAAP measures.
Linda Rendle: Now I'll turn it over to Linda.
Linda: Thank you for joining us today.
Linda Rendle: During the third quarter, we continued to progress our recovery from the August cyberattack while advancing our IGNITE strategy to build a stronger, more resilient company. For the most part, our progress in the third quarter was in line with our expectations, although sales came in lower as a few businesses experienced slower supply recovery than we planned.
Linda: During the third quarter, we continued to progress our recovery from the August cyber attack, while advancing our ignite strategy to build a stronger more resilient company.
Linda: For the most part our progress in the third quarter was in line with our expectations sales came in lower as a few businesses experienced slower supply recovery than we planned.
Linda Rendle: Gross Margin came in higher, benefiting from our Margin Transformation Program and a moderate cost environment. Despite lower sales and strong investments in our brands, we finished the quarter ahead of our expectations on adjusted earnings per share. Before we turn to questions, I think stepping back and putting these results in context is important.
Linda: Gross margin came in higher benefiting from our margin transformation program and a mark.
<unk>.
Linda: Despite lower sales and strong investments in our brands. We finished the quarter ahead of our expectations on adjusted earnings per share.
Speaker Change: Before we turn to questions I think stepping back and putting these results in context is important give.
Linda Rendle: Given the magnitude of disruption from the cyber attack, we knew our plans to restore the fundamentals of our business would be complex, and the recovery path would not be linear. We have made tremendous progress and are laser focused on finishing the job. We tracked well ahead of our expectations in the second quarter and knew we had more work to do as we entered the back half of the year to return our business to the strong trajectory it was on at the start of fiscal year 24.
Speaker Change: Given the magnitude of disruption from the cyber attack, we know our plans to restore the fundamentals of our business would be complex and our recovery path would not be linear.
We have made tremendous progress and are laser focused on finishing the job.
We tracked well ahead of our expectations in the second quarter and knew we had more work to do as we entered the back half of the year to return our business to the strong trajectory. It was on at the start of fiscal year 'twenty for.
Linda Rendle: This included fully rebuilding inventories, restoring normalized service levels, and rebuilding commercial plans for each of our businesses, which we accomplished by the end of the third quarter. These actions unlock our ability to fully restore lost distribution due to the fiber attack and return to normalized merchandising levels as planned in the fourth quarter. Through Q3, we regained nearly 90% of the market share we lost and expect to make further progress in Q4.
Speaker Change: This included fully rebuilding inventories restoring normalized service levels and rebuilding commercial plans for each of our businesses, which we accomplished by the end of the third quarter.
Speaker Change: These actions unlock our ability to fully restore lost distribution due to the cyber attack and returned to normalized merchandising levels as planned in the fourth quarter.
Speaker Change: Through Q3, we regained nearly 90% of the market share we lost and expect to make further progress in Q4.
Speaker Change: With service levels, now normalized and strong investment levels behind our brands. We're confident we can rebuild household penetration and returned to volume growth over time.
Linda Rendle: With service levels now normalized and strong investment levels behind our brands, we're confident we can rebuild household penetration and return to volume growth over time. Despite the significant disruption and lost sales we've experienced, and based on our team's strong work, we are now positioned to exceed our original gross margin target and meet or exceed our adjusted EPS guidance we provided at the beginning of the year, before the cyber attack. Importantly, our recovery progress to date puts us in a good position to exit fiscal 2024 with strong fundamentals.
Speaker Change: Despite the significant disruption and lost sales, we've experienced and based on our team's strong work. We are now positioned to exceed our original gross margin target and meet or exceed our adjusted EPS guidance. We provided at the beginning of the year before the cyber attack and.
Speaker Change: Importantly, our recovery progress to date puts us in a good position to exit fiscal 2024 with strong fundamentals.
Speaker Change: In addition, we continue to execute well against our ignite strategic priorities throughout our recovery.
Linda Rendle: In addition, we continue to execute well against our IGNITE strategic priorities throughout our recovery. We made substantial progress rebuilding growth margins, continuing to target returning to pre-pandemic levels over time. We launched innovation, invested in our brands and capabilities, progressed our streamlined operating model and digital transformation, and completed the divestiture of our Argentina business, which supports our goal of evolving our portfolio to deliver more consistent and profitable growth. In closing, we're taking the right steps to navigate the near term and continuing to advance our IGNITE strategy. I'm confident we have the right investments and plans to deliver against our strategic and financial objectives and enhance long-term shareholder value. With that, Kevin and I will take your questions.
Speaker Change: We made substantial progress rebuilding gross margins continuing to target returning to pre pandemic levels over time.
Speaker Change: We launched innovation investing in our brands and capabilities progressed, our streamlined operating model and digital transformation and completed the divestiture of our Argentina business, which supports our goal of evolving our portfolio to deliver more consistent and profitable growth.
Speaker Change: In closing, we're taking the right steps to navigate the near term and continuing to advance our ignite strategy I'm confident we have the right investments and plans to deliver against our strategic and financial objectives and enhance long term shareholder value.
Speaker Change: With that Kevin and I will take your questions.
Speaker Change: Yeah.
Kevin B. Jacobsen: Thank you Ms Randolph, ladies and gentlemen, if you have a question. Please press star one on your Touchtone phone.
Operator: Thank you, Ms. Rendle. Ladies and gentlemen, if you have a question, please press star 1 on your touchtone phone. And our first question comes from Peter Grom of UBS. Your line is open.
Kevin Jacobsen: Yeah.
Kevin B. Jacobsen: And our first question comes from Peter Grom of UBS. Your line is open.
Peter K. Grom: Thank you operator, and good afternoon, everyone hope you're doing well.
Peter K. Grom: Thank you, operator, and good afternoon, everyone. I hope you're doing well.
Peter K. Grom: I was hoping to get some more color on kind of the implied 4Q organic sales growth and how this informs you on kind of the path forward here. I know this was always the case, but it seems like you're expecting to kind of close some of these distribution gaps in 4Q, more or less implying that you're going to overship versus consumption. Well, when you kind of look at the implied 4Q guide to kind of where you need to be to land at the low end of low single digits for the year, it doesn't really imply a ton of growth considering this dynamic.
Peter K. Grom: I was hoping to get some more color on kind of the implied <unk> organic sales growth and how this informs you also kind of the path forward here.
Peter K. Grom: I know this is always the case, but it seems like you're expecting to kind of close some of these distribution guidance of <unk> more or less inclined that youre going to over ship versus consumption, but when you kind of look at the implied <unk> guide to kind of where you need to be to land at the low end of low single digits for the year doesn't really imply a ton of growth considering this dynamics. So maybe first.
Peter K. Grom: Am I thinking about that right and if so how does this exit rate informed your view on the growth looking out to next year just in the context of the long term algorithm of 3% to 5%. Thanks.
Peter K. Grom: So maybe first, am I thinking about that right? And if so, how does this exit rate inform your view on growth looking out to next year, just in the context of the long-term algorithm of 3 to 5 percent? Thanks.
Linda Rendle: Thanks Peter. Why don't I get us started and I'll just talk about some of the dynamics that we expect in the fourth quarter and then I'll hand it to Kevin, and he can talk about the outlook, and, of course, you'll appreciate we're not setting guidance for fiscal year 25 at this point, but Kevin can certainly give you how we're thinking about the exit. So, as it comes to Q4, you know, there are a number of dynamics and things that are important that we plan to do and have the right plans to address. And the first is what you mentioned.
Speaker Change: Thanks, Peter why don't I get started and I'll just talk about some of the dynamics that we expect in the fourth quarter, and then I'll hand, it to Kevin and he can talk about the outlook and of course, you'll appreciate we're not setting guidance for fiscal year 'twenty five at this point, but Kevin can certainly give you how we're thinking about.
Peter K. Grom: The exit.
Kevin B. Jacobsen: So as it comes to Q4, there are a number of dynamics and things that are important that we plan to do and have the right plans to address and the first is what you mentioned, we intend to fully restore the temporary distribution. We lost as a result of the cyber attack and we are well on track to do that.
Linda Rendle: We intend to fully restore the temporary distribution we lost as a result of the cyber attack, and we are well on track to do that. At this point, we know the decisions on the shelf resets from all of our major retailers. We built the inventory in order to supply those distribution losses and are on track to restore that distribution. So, certainly, that will help both reported and organic sales as we head into the fourth quarter.
Peter K. Grom: At this point, we know the decisions on the shelf resets from all of our major retailers.
Peter K. Grom: We built the inventory in order to supply those distribution losses and are on track to restore that distribution. So certainly that will help.
Peter K. Grom: Both reported and organic sales as we head into the fourth quarter. The second dynamic is now that we have a fully restored our ability to supply and are back to normalized service levels, we're going to return to our merchandising plans, which if you recall from our earlier conversations we expect to be higher than they were during the pandemic basically returning to prepay.
Linda Rendle: The second dynamic is now that we've fully restored our ability to supply and are back to normalized service levels, we are going to return to our merchandising plans, which, if you recall from our earlier conversations, we expect to be higher than they were during the pandemic, basically returning to pre-pandemic levels. And that is on track as well for the fourth quarter, and both of those will support growth. The thing I would mention, and as you can see, the implied range is rather large, and that's because it's still quite variable and volatile what we're dealing with.
Peter K. Grom: <unk> levels and that is on track as well for the fourth quarter in both of those will support growth. The thing I would mention and as you can see the implied range is rather large and that's because it's still quite variable and volatile what we're dealing with we're dealing with a complex recovery.
Linda Rendle: We're dealing with a complex recovery. Shelf resets are all at different times for our retailers. How fast those resets happen, and then, of course, where we are on the purchase cycle with consumers will matter, and that's informing the depth and breadth of that range. I'll hand that over to Kevin, and he can help you think about just how that plays out in the outlook.
Peter K. Grom: Self resets are all at different times for our retailers how fast those resets happen.
Peter K. Grom: And then of course, where we are on the purchase cycle with consumers will matter and and that's informing the depth and breadth of that range, but I'll hand that over to Kevin and he can help you think about just now how that plays out in the outlook.
Kevin B. Jacobsen: Hey Peter, as it relates to the outlook and I think specifically your question about organic sales growth in Q4, what I expect to see occurring this quarter is improving volume trends. If you look at our volume performance, we're down about 7% in the front half of the year, and down 4% in Q3. I expect that to continue to improve as we move forward. I also expect we'll see some increased trade spending.
Kevin B. Jacobsen: Peter as it relates to the outlook and I think specifically your question on organic sales growth in Q4.
Kevin B. Jacobsen: I expect to see occurring this quarter is improving volume trends.
Kevin B. Jacobsen: If you look at our volume performance, we're down about 7% front half of the year down 4% in Q3, I expect that to continue to improve as we move forward.
Kevin B. Jacobsen: I also expect we'll see some increased trade spending we continue to work back toward a more normalized promotional environment Q3 was still below sort of that normal level. So I think you would expect to see some increased trade spending.
Kevin B. Jacobsen: We continue to work back towards a more normalized promotional environment. Q3 was still below sort of that normal level, so I think you would expect to see some increased trade spending. And then, as a result of the divestiture of Argentine business, it's gotten a lot simpler.
Kevin B. Jacobsen: And then as a result of the divestiture of Argentina business, it's gotten a lot simpler I don't expect any FX headwinds.
Kevin B. Jacobsen: I don't expect any FX headwinds. I don't expect any meaningful pricing. Now most of our pricing was international, and that would all go away. So you should see improving volume trends, a little bit of an uptick in trade spending. And that gets you down to probably, you know, flat to down a little bit in terms of organic sales growth in Q4. And that would keep us on track to be up about 1%.
Kevin B. Jacobsen: Any meaningful pricing now most of our pricing was in international that would all go away. So you should see improving volume trends a little bit of uptick in trade spending and that gets you down to probably flat to down a little bit in terms of organic sales growth in Q4.
Kevin B. Jacobsen: That would keep us on track to be up about 1% for the year.
Speaker Change: Awesome. Thanks, so much.
Kevin B. Jacobsen: And Kevin, maybe just one follow-up, or more of a piece of clarification. In the prepared remarks, you mentioned, you know, kind of building on the 43% gross margin exiting the year. Is that a broad-based comment? Or are you talking specifically about building relative to the 4Q exit rate?
Speaker Change: And then maybe just one follow up or more of a just a clarification.
Speaker Change: In the prepared remarks, you mentioned.
Speaker Change: Kind of building on the 43% gross margin exiting the year is that a broad based comment or are you talking specifically on building relative to the <unk> exit rate.
Speaker Change: Yes, I think there's a few things you saw where we landed Peter in Q3, a little over 42%, we think will be closer to 43% we exited.
Kevin B. Jacobsen: Yeah, I think there are a few things. You saw where we landed, Peter, in Q3, a little over 42%. We think we'll be closer to 43% when we exit. But you know, as Linda said, we're not prepared to provide our outlook for next year. But I will tell you, we fully expect to continue to expand margins in fiscal year 25. So we'll exit this year. You know, over the full year, we're probably up around 42%, and I expect to build on that next
Speaker Change: That said, we're not prepared to provide our outlook for next year, but I would tell you we fully expect to continue to expand margins in fiscal year 'twenty five so we'll exit this year over the full year, we're probably up around 42% and I expect to build on that next year.
Speaker Change: Thanks, So much I'll pass it on.
Peter K. Grom: Thanks so much. I'll pass it on.
Speaker Change: Thanks, Steve.
Speaker Change: Our next question comes from Andrea Teixeira Jpmorgan.
Operator: Our next question comes from Andrea Teixeira of J.P. Morgan.
Andrea F. Teixeira: Your line is open.
Andrea F. Teixeira: Thank you, everyone, and good afternoon there. Linda, you mentioned in the prepared remark that a few areas of the portfolio that experienced slower supply recovery than planned, and that impacted the third quarter. And I understand the 10% that you mentioned that still is below the service levels. But relative to your 2% organic growth, how much was all-channel consumption given also comments in that same report that you experienced consumption losses? So can you elaborate more on which areas you were still below in share and what gives you confidence that the consumers you lost during that period within your consumption patterns would come back?
Andrea F. Teixeira: Thank you everyone.
Andrea F. Teixeira: Good afternoon there.
Andrea F. Teixeira: Linda you mentioned in the prepared remarks, so a few areas of the portfolio that experience.
Andrea F. Teixeira: Slower supply recovery than planned.
Andrea F. Teixeira: That impacted the third quarter and I understand the 10% that you mentioned that shoe is below the service levels.
Andrea F. Teixeira: But relative to your 2% organic growth how much.
Andrea F. Teixeira: Was all channel consumption given also comment in that same report that you experience comes from some losses. So can you elaborate more on which areas you were still below share and what gives you confidence that.
Andrea F. Teixeira: The question is your loss during that period within you are a consumption patterns would come back in.
Andrea F. Teixeira: And then, Kevin, a clarification on what you just said about building margins into 2025, the fiscal year 2025. How do you see rising prices and other commodities? Are you embedding this into inflationary commodities? And how would you expect to offset that? Is that mostly other savings that ignite how we should be thinking as we move forward?
Andrea F. Teixeira: And then Kevin clarification on what you just said about building.
Andrea F. Teixeira: Margins into 2025 for fiscal 2025.
Andrea F. Teixeira: How do you see rising prices in all the commodities are you embedding some inflationary.
Andrea F. Teixeira: Commodities and how would you expect.
Andrea F. Teixeira: To offset that is that most of the other savings that unite how.
Andrea F. Teixeira: How we should be thinking as we move forward.
Andrea F. Teixeira: Sure.
Linda Rendle: All right, I'll get started with that first question. And I think the question was, so I'll start first maybe addressing the areas in supply that we called out that impacted sales for the quarter. And then I'll talk a bit more about the consumer and the confidence that we have about where we are and that we have the right plans in place as we roll into Q4 to continue to accomplish what we intend to do around the consumer and restore our business fundamentals.
Speaker Change: Right I'll get started with that first question.
Speaker Change: The question was.
Speaker Change: Two fold so I'll start first maybe addressing the areas on supply that we called out it impacted sales for the quarter and then I'll talk a bit more about the consumer and the confidence that we have about where we are and that we have the right plans in place as we roll into Q4 to continue to.
Andrea F. Teixeira: Two.
Andrea F. Teixeira: Accomplish what we intend to do around the consumer and restore our business fundamentals. So on supply recovery and we talked about the last call actually the call before that we had a couple of businesses that were more challenged given the depth of our portfolio and and that was glad and we called out that are as well and those continue to be a challenge a bit longer than that.
Linda Rendle: So in supply recovery, you know, we talked about the last call and actually the call before that we had a couple of businesses that were more challenged given the depth of their portfolio, and that was GLAD, and we called out Litter as well. And those continued to be a challenge a bit longer in the quarter than we had originally anticipated at the time of forecast.
Andrea F. Teixeira: <unk> than we had originally anticipated at the time of forecast. The good news is that with a few other minor things and businesses, we were able to fully.
Andrea F. Teixeira: Fix all of those by the end of the quarter and we exited Q3 getting back to normalized service levels to our customers and so feel good that as we head into Q4 or we have the right inventory and we have the right production plans and plans with our retailers to be able to get back all of those distribution points that we lost temporarily and again.
Linda Rendle: The good news is that with a few other minor things in our businesses, we will fix all of those by the end of the quarter. And we exited Q3, getting back to normalized service levels to our customers. And so, I feel good that as we head into Q4, we have the right inventory, and we have the right production plans and plans with our retailers to be able to get back all of those distribution points that we lost temporarily. And again, restore merchandise. So again, that was a temporary thing in nature that affected Q3, but we don't anticipate that it will impact Q4. If you look at the consumer, there are a few things going on.
Andrea F. Teixeira: Restore merchandising.
Andrea F. Teixeira: So again that was a temporary thing in nature impact to Q3, but we don't anticipate that will impact Q4.
Andrea F. Teixeira: If you look at the consumer you know a few things going on first or.
Linda Rendle: First, our distribution points are still down versus pre-cyber, which we had anticipated. And we knew that the majority of shelf resets would happen in Q4. That is still going as planned, and we expect to fully regain that distribution that we anticipated having at the beginning of the year when we set our original outlook. So, we are on track there.
Andrea F. Teixeira: Our distribution points are still down versus pre cyber, which we had anticipated and we knew that the majority of shelf resets what happened in Q4 that is still going as planned and we expect to fully regain that distribution that we anticipated having at the beginning of the year. When we set our original outlook. So on track there and then I would say, we're starting to see the share turnarounds with <unk>.
Linda Rendle: And then I would say we're starting to see a share turnaround. So we've recovered nearly 90% of our share loss. And actually, if you even look at the last few weeks, you've continued to see that trend improve.
Andrea F. Teixeira: Nearly 90% of our share loss.
Andrea F. Teixeira: And actually if you even look at the last few weeks, you've continued to see that trend improve.
Linda Rendle: And in addition, we're rebuilding households. So our households in Q3 are still down versus pre-cyber, which we expected, but they are improving and moving in the right direction. And if you think about it, we really only had one purchase cycle for the consumer in our categories, which is about 90 days, so we've had one chance to influence as that consumer comes back to the shelf, and we're not fully restored yet.
Andrea F. Teixeira: And in addition, we're rebuilding households, so our households in Q3 are still down versus <unk>.
Andrea F. Teixeira: Pre cyber, which we expected, but improving and moving in the right direction.
Andrea F. Teixeira: And if you think about it we really only had from when we fully restored inventories and again haven't fully restore distribution at basically one purchase cycle for the consumer in our categories purchase cycles about 90 days. So we've had one chance to influence is that consumer comes back to the shelf and we are not fully restored yet what we're laser focused on in Q4 and this is why we have.
Linda Rendle: What we're laser focused on in Q4, and this is why we have the investment levels that we do, where we've increased our spending on advertising and sales promotion, as well as reduced revenue, ensuring that we have the right spending so that in this next purchase cycle, we can recapture that consumer. We intend to do as much of that as we can in Q4, and we're hoping to get the majority of it done.
Andrea F. Teixeira: The investment levels that we do where we've increased our spending on advertising and sales promotion as well as reduced revenue ensuring that we have the right spending that in this next purchase cycle that we can recapture that consumer we intend to do as much of that as we can in Q4 and and we're hoping to get the majority of it on we're very confident on distribution very confident in our merchandising and now we're just.
Linda Rendle: We're very confident in distribution, very confident in merchandising, and now we're just watching as the consumer comes back to a fully stocked shelf, what is their behavior, and do we need to make any tweaks as we head into the beginning of the fiscal year.
Andrea F. Teixeira: Watching as the consumer comes back to a fully stocked shelf what is their behavior and do we need to make any tweaks as we head into the beginning of fiscal year 'twenty five but feel very good about where we are in restoring the fundamentals and very good that we're beginning to see the consumer come back that we lost during that time.
Speaker Change: Okay. That's helpful.
Kevin B. Jacobsen: That's helpful, Andrea. Your question on 25 gross margin, you know, as I'm sure you can appreciate, we're still in the process of building our plant right now for 25. But, you know, where we're sitting today, I fully expect we're gonna be growing the top line, expanding margins, and growing earnings. And so as you think about how we grow margin, I think to your specific question, certainly top-line growth helps build margin. Additionally, the divestiture of our Argentina business, which was margin diluted to the company.
Speaker Change: And your question on 25 of gross margin as I'm sure. You can appreciate we are still in the process of building a plant right now for 25, but we are.
Speaker Change: We're sitting at today I fully expect that we'd be growing top line expanding margins growing earnings.
Speaker Change: And so as you think about how we grow margin I think your specific question.
Speaker Change: Certainly topline growth helps build margin.
Speaker Change: Additionally.
Speaker Change: The divestiture of our Argentina business that was margin dilutive to the company. So divesting that business certainly helps the margin.
Kevin B. Jacobsen: So divesting that business certainly helps our margin. And then our margin transformation efforts, we think collectively that more than offsets what we believe will be a level of cost inflation. But we continue to moderate. So we do not believe right now that we're going to be in a deflationary environment next year. There will be some cost inflation, but it continues to moderate. And the actions I just mentioned are more than enough to offset that and allow us to continue to build margin, but the exact amount we're still working through.
Speaker Change: Our margin transformation.
Speaker Change: Efforts recent collectively that more than offsets what we believe will be a.
Speaker Change: Level of cost inflation, but continue to moderate so we do not believe right now we're going to be in a deflationary environment next year, there will be some cost inflation, but it continues to moderate.
Speaker Change: Actions I just mentioned, we think are more than enough to offset that and allow us to continue to build margin next year.
Speaker Change: Yeah.
Speaker Change: We're still working through.
Andrea F. Teixeira: Thank you. That's super helpful. In Argentina, what is the impact of removing Argentina as a tailwind?
Speaker Change: Yeah. Thank you that's super helpful. In Argentina, what is the impact of removing ashwin C&I as a tailwind.
Speaker Change: Yes, we don't break that out specifically, but I can tell you. It was significantly below the company average in terms of gross margins you can probably do some math it was 10% of sales well below the company average in terms of gross margin.
Kevin B. Jacobsen: Yeah, we don't break that out, Andrea, specifically. But I can tell you it was significantly below the company average in terms of gross margins. You can probably do some math, it was 2% of sales and well below the company average in terms of gross.
Speaker Change: Uh-huh, Okay very good. Thank you very much I'll pass it on.
Andrea F. Teixeira: Okay, very good. Thank you very much. I'll pass it on. Yes.
Speaker Change: Yes. Thank you.
Speaker Change: Our next question comes from Chris Carey of Wells Fargo.
Operator: Our next question comes from Chris Carey of Wells Fargo.
Operator: [inaudible] Our next question comes from Chris Carey of Well.
Christopher M. Carey: Your line is open.
Christopher M. Carey: And everyone.
Christopher M. Carey: Hi, Chris.
Christopher M. Carey: Yeah.
Christopher M. Carey: I wanted to ask about sales delivery in the quarter excluding international.
Christopher M. Carey: I wanted to ask about Dale's delivery in the quarter, excluding international. So in the preparatory march, you spoke about increased competitive activity as you were trying to get back on shell.
Christopher M. Carey: Yeah.
Chris: So in the prepared remarks, you spoke about.
Christopher M. Carey: Increased competitive activity as you were trying to get back on shelf.
Christopher M. Carey: Price mix with negative and your similar key division in the quarter. And I'm trying to marry that with I think you had sounded quite good recently on the logistical dynamic of getting back on the shelf in the quarter. And so I guess I'm trying to put maybe all together the why behind sales coming in a bit below your expectations and whether competitors are perhaps, you know, a bit firmer on shelf and share gains than you had expected and, and you need to increase. So you can see I'm trying to wrestle between not just that sales came in below expectations but the why and some of the actions that you seem to be taking to try and rectify the situation.
Christopher M. Carey: Price mix.
Christopher M. Carey: Negative in your some of your key divisions.
Christopher M. Carey: In the quarter.
Christopher M. Carey: And I'm trying to marry that with I think you had sounded quite good recently on the logistical dynamic of getting back on shelf.
Christopher M. Carey: In the quarter.
Christopher M. Carey: And so I guess I'm trying to put maybe altogether, the why behind sales coming in a bit below your expectations and whether competitors or perhaps a.
Christopher M. Carey: With firmer on shelf and share gains than you had expected and you need to increase.
Christopher M. Carey: This spending whether that's in price mix and obviously you called out some trade promo in your gross margin this quarter to get back on shelf.
Christopher M. Carey: Whether you think.
Christopher M. Carey: To your comment to the prior question you may need to actually accelerate that spending over the next several quarters if this.
Christopher M. Carey: Uplifts does not exactly how you expect so you can tell I'm trying to wrestle between not just that sales came in below the expectation, but the why in some of the actions that you seem to be taking to try and rectify the situation.
Speaker Change: Yeah, Chris.
Linda Rendle: Yeah, Chris, from all the data that we see the progress we've made with the consumer and what we anticipate will happen here in Q4, we do not feel like we have a dynamic where the sales miss was due to a consumer issue that we have or, you know, not bouncing back to that degree with the household penetration we lost. This was simply because we had two very complex businesses; we thought we would make more progress on supply than we did. It took longer; it went on through the remainder of the quarter when we thought we would get it done mid-quarter.
Speaker Change: From all the data that we see the progress we've made with the consumer and what we anticipate will happen here in Q4, we do not feel like we have a dynamic that.
Christopher M. Carey: The sales Miss was due to a consumer issue that we have or.
Christopher M. Carey: Not bouncing back to that degree with.
Christopher M. Carey: Household penetration we lost this was simply we had two very complex businesses. We thought we would make more progress on supply than we did it went longer it went through the remainder of the quarter. When we thought we would get it done mid quarter.
Christopher M. Carey: That.
Linda Rendle: That And impacted our ability to supply for merchandising, mostly distribution. But we always knew it would come back in the fourth quarter because that's when retailers reset their shelves. So the good news is that we were able to fully restore supply by the end of the quarter. We're still on track to recover that distribution, but this really was, you know, heightened competition as we weren't able to supply merchandise events. And, you know, still not in a place where we were fully able to supply those couple of businesses. But we're through that. We got through it at the end of Q3.
Christopher M. Carey: It impacted our ability really to supply for merchandising, mostly distribution, we always knew would come back in the fourth quarter, because that's when retailers reset their shelves. So the good news is because we were able to fully restore supply by the end of the quarter. We're still on track to recover that distribution, but thats really was.
Christopher M. Carey: Aten competition, as we weren't able to supply merchandising events.
Christopher M. Carey: And you're still not in a place where we were fully able to supply on those couple of businesses, but we're through that we got through that at the end of Q3.
Linda Rendle: We have the ability now to fully supply in Q4. That investment level, we feel it's the right investment level. And I'll just be clear; we have not constrained our businesses.
Christopher M. Carey: We have the ability now to fully supply in Q4 that investment level, we feel it's the right investment level and I'll just be clear we have not constrained our businesses. We have said they should spend what they need to to get these household back that is contemplated in the outlook that we provided and.
Linda Rendle: We have said they should spend what they need to to get these households back, and that is contemplated in the outlook that we provided. And we believe we have the right amount of spending on both advertising and sales promotion and merchandising. And if we have to make adjustments as we go through the quarter, we will. But right now, we feel like we have the right plans. We're seeing those households come back. Again, we went through one purchase cycle.
Christopher M. Carey: We believe we have the right spending on both advertising and sales promotion and merchandising.
Christopher M. Carey: And if we have to make adjustments as we go through the quarter, we will but right now we feel like we have the right plans, we're seeing those households come back again, we went through one purchase cycle, we're going through another one here in Q4, but all indicators are that we will restore our business.
Linda Rendle: We're going through another one here in Q4, but all indicators are that we will restore our business, and we feel like the fundamentals will be fully recovered by the end of Q4 and set us up well as we head into fiscal year 2020.
Christopher M. Carey: And we feel like the fundamentals will be fully recovered by the end of Q4 and set us up well as we head into fiscal year 'twenty five.
Speaker Change: Okay. Thanks. Thank you for that one quick follow up would just be.
Christopher M. Carey: Okay, thanks. Thank you for that.
Christopher M. Carey: Manufacturing and logistics.
Speaker Change: Was a.
Speaker Change: 210 basis point negative impact to gross margin in the quarter, that's a pretty notable step up.
Christopher M. Carey:
Christopher M. Carey: And I don't think we're seeing logistics inflation at that level.
Kevin B. Jacobsen: One quick follow-up on just the manufacturing and logistics, which was a 210 basis point negative impact on gross margin in the quarter. That's a pretty notable step up. And I don't think we're seeing logistic inflation to that level. Kevin, can you maybe just contextualize what happened there in the quarter and whether that, specifically, is durable going forward or whether this is just an anomaly. Sure, Chris.
Christopher M. Carey: Kevin can you, maybe just contextualize what happened there in the quarter and weather.
Kevin B. Jacobsen: That typically is durable going forward or whether this is just an anomaly.
Kevin B. Jacobsen: Sure Chris.
Kevin B. Jacobsen: Sure, Chris. The increase you referred to is primarily driven by inflation in Argentina. You might recall, before we divested that business, we were projecting about 300% inflation, and they had a significant devaluation in December. So that was playing out, and it's the biggest driver. To your question, as you go forward, now that we've divested the business, I would not expect to see logistics and manufacturing be that level of a drag
Kevin B. Jacobsen: The increase you referred to that is primary driven by inflation in Argentina.
Kevin B. Jacobsen: You might recall before he divested that business, where you were projecting about 300% inflation and they had a significant devaluation in December so that was playing through and it's the biggest driver.
Kevin B. Jacobsen: To your question as you go forward the other divested business I would not expect to see logistics and manufacturing be that level of a drag logistics is turning on its fairly benign in terms of year over year cost once you strip out Argentina. So this was one of the additional benefits of not having that business in our portfolio any longer given the disruptions.
Kevin B. Jacobsen: The logistics business is turning on us. It's fairly benign in terms of year over year costs once you strip out Argentina. So this was one of the additional benefits of not having that business in our portfolio any longer, given the disruptions it caused broadly across the PNM.
Kevin B. Jacobsen: Broadly across the P&L.
Speaker Change: Okay. Thank you.
Speaker Change: As a reminder, if you do have a question. Please press star one on your Touchtone pad.
Operator: As a reminder, if you do have a question, please press star 1 on your touchtone pad. And our next question comes from Dara Mohsenian of Morgan Stanley. Your line is open.
Speaker Change: Next question comes from.
Speaker Change: Dara most simeon.
Speaker Change: Morgan Stanley Your line is open.
Dara: Hey, guys.
Dara Warren Mohsenian: Hey guys, I get you don't want to be too explicit about fiscal 25 at this point, but I just had a follow-up question on top line growth as we move into next year, just relative to a normal base this year. Kevin, can you just talk about, or Linda, any puts and takes as you look out to fiscal 25 as we think about top-line growth? And maybe also just quantify what level of sales did you lose in Fiscal 24? Do you expect to lose in Fiscal 24 from the systems issue relative to a typical year?
Speaker Change: Don't want to be.
Speaker Change: <unk> explicit for fiscal 'twenty five at this point, but I just had a follow up question on top line growth as we move into next year, just relative to what a normal base this year.
Speaker Change: Kevin can you just talk about or Linda any puts and takes as you look out to fiscal 'twenty five.
Speaker Change: We think about top line growth and maybe also just quantify what level of sales did you lose in fiscal 2004 or do you expect to lose in fiscal 'twenty four from the systems issue relative to a typical year.
Speaker Change: Hey, Gerard.
Kevin B. Jacobsen: Hey Dara, you know what I'd say is it's a little too early for us to talk specifically about 25. As I said, we're still developing our plan. Maybe the one item I would just make sure to remind folks is, with the divestiture of the Argentina business, that's about two points of sales. We'll see a portion of that in Q4, but you'll probably still have about a point and a half headwind next year as a result of that sale. But for the other items, we're going to wait until August to have that conversation because we're still working through our plans. It would just be too early to discuss any details.
Speaker Change: You know what I said, it's a little too early for us to talk too specifically about 45 as I said, we're still developing our plan.
Speaker Change: Maybe the one item I would just make sure remind folks is with the divestiture of Argentina business. That's about two points of sales, we will see a portion of that in Q4, but you'll probably still have about a point and a half headwind next year as a result of that sale, but for the other items, we're going to wait till August to have that conversation because we're still working through our plans. It just be too early to talk.
Speaker Change: Any detail.
Speaker Change: Okay.
Dara Warren Mohsenian: Okay, and then on gross margins. You talked about ACAGNY focusing on holistic margin management and RGM.
Speaker Change: Okay, and then on gross margins.
Speaker Change: <unk> talked about at Cagny, the focus on holistic margin management or Jim can you give us a little more color on how important that might be over the next couple of years and as you think about recovering gross margin pressure over time as you indicated in the prepared remarks is that a big piece.
Dara Warren Mohsenian: Can you give us a little more color on how important that might be over the next couple of years? And as you think about recovering gross margin pressure over time, as you indicated in the prepared remarks, is that a big piece of the recovery? And as we think about the recovery, is this a multi-year effort? Should we expect a lot of progress coming out of fiscal 25? How do you think about that conceptually? Sure, Dara, without, obviously...
Speaker Change: Of the recovery and as we think about the recovery is this a multiyear effort should we think about a lot of progress coming out of fiscal 'twenty. How do you think about that conceptually from a timing standpoint.
Jim: Sure Dara without obviously again, providing any guidance for 25 or beyond on specifics you know I think I can say with really strong confidence one based on the track record. If you looked we delivered our sixth consecutive quarter.
Linda Rendle: Sure, Dara. Without, obviously, again, providing any guidance for 25 or beyond on specifics, I think I can say with really strong confidence, one, based on the track records, if you look, we've delivered our sixth consecutive quarter of gross margin expansion behind this toolkit that we have. And what we talked about at Cagney is important. Pricing and cost savings have been the majority of the tools that we've had, and we've put them to good use over the last couple of years as we've dealt with inflation.
Jim: Quarter of gross margin expansion behind this toolkit that we have and.
Jim: And when we talked about at Cagny is important.
Jim: Pricing and cost savings have been the majority of the tools that we've had we've put them to good use over the last couple of years as we've dealt with inflation.
Linda Rendle: But we knew that we wanted to take a broader look, and the fact that we're implementing a digital transformation and we have more visibility end to end gave us a great opportunity to look and see where else we can go beyond traditional cost savings. Revenue growth management is certainly one of those tools, price pack architecture within that, and the teams all have plans in place to use those tools to continue to make progress against our commitment that we stand behind to return gross margins to pre-pandemic levels and then grow from there. And we feel very confident in our ability to do so. You know, and Kevin and I have talked before, it's really dependent on two things.
Jim: But we knew that we wanted to take a broader look and the fact that we're implementing a digital transformation and we have more visibility end to end gave us a great opportunity to look and see where else can we go beyond traditional cost savings and revenue growth management is certainly one of those tools price pack Arctic architecture within that.
Jim: And the teams all have plans in place to use those tools to continue to make progress against our commitment that we stand behind to return gross margins to pre pandemic levels and then grow from there and we feel very confident in our ability to do that and Kevin and I have talked before it's really dependent on two things one how fast we implement this toolbox and feel good about that.
Linda Rendle: One, you know, how fast we implement this toolbox and feel good about that. But the second will be what the cost environment looks like. And as we continue to look forward, we continue to see inflation in people's reporting. Again, we're not providing any specifics about our business at this point, but the pace of recovery and when we return to pre-pandemic levels will be those two factors, but we feel very good about what's in our control and that we have the right toolbox to be able to accomplish what we've set out to do.
Jim: But second will be what the cost environment looks like and that's what we continue to looking forward, we continue to see inflation and People's reporting again, we're not providing any specifics around our business at this point.
Jim: But the pace of recovery and when we returned to pre pandemic levels will be those two factors, but we feel very good about what's in our control and that we have the right tool box to be able to accomplish what we set out to do.
Jim: Okay.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Thanks Dara.
Speaker Change: Our next question comes from.
Operator: Our next question comes from Anna Lizzul of Bank of America.
Speaker Change: Bank of America your.
Speaker Change: Your line is open.
Speaker Change: Yeah.
Anna Jeanne Lizzul: Hi, good afternoon. Thank you for the question. You mentioned your prepared remarks, a consumer who remains under pressure. I was wondering if you're seeing this across all income tiers, or is this comment primarily related to the lower income consumer, as some other companies have indicated so far in Q1. And then you mentioned your levels of merchandising and promotion are increasing, along with a higher advertising spend in the second half here. So I was wondering how much of this is driven by the need to rebuild share loss from the cyber attack? Versus just trying to win over a financially weaker consumer. Thank you.
Speaker Change: Hi, good afternoon, and thank you for the question.
Speaker Change: You mentioned in your prepared remarks, the consumer who remains under pressure I was wondering if youre seeing that across all income tiers or is this comment primarily related to the lower income consumer as some other companies have indicated so far in Q1.
Speaker Change: And then you mentioned your levels of merchandising and promotion are increasing along with a higher advertising spend in the second half year. So just wondering how much of this is driven by the need to rebuild the share loss from the cyber attack versus just trying to win over a financially weaker consumer. Thank you.
Speaker Change: Sure you know, we're seeing pressure across all consumer groups.
Linda Rendle: Sure. You know, we're seeing pressure across all consumer groups, and we're seeing behaviors broadly outside of our categories changing for nearly everyone as they evaluate what's going on and as they think about what's happening in the future, whether that comes down to the interest rate environment, et cetera, the cost of housing, the cost of a basket of groceries when they go to the store. So we're seeing that behavior quite broadly, and we've called it value-seeking.
Speaker Change: And we're seeing behaviors broadly outside of our categories changing for nearly everyone as they evaluate what's going on and as they think about what's happening in the future whether that come down to the interest rate environment.
Speaker Change: Cost of housing a cost of a basket of groceries when when they go to the store. So we're seeing that behavior quite broadly and we've called it value seeking you know people are buying larger sizes. They are buying smaller sizes.
Linda Rendle: You know, people are buying larger sizes, they're buying smaller sizes, and they're thinking about the trips they take, et cetera. I would say, in particular, we always have our eyes focused on the lower-income consumer, as they are more pressured, and to date, we've stood very well with them, and we tend to do it during tough economic times for low-income consumers, because we deliver products at a great value that work really well, and they can't afford to make a mistake in our categories.
Speaker Change: And they are thinking about the trips they take.
Speaker Change: Et cetera.
Speaker Change: I'd say in particular, we always have our eyes focused on the lower income consumer as they are more pressured than I and to date, we've stood very well with them and we tend to do it during times tough economic times for low income consumers, because we deliver products at a great value that work really well.
Speaker Change: And they can't afford to make a mistake in our categories and so we typically fared well and we continue to see that we are doing well with low income consumers and we haven't seen a material trade to private label that isn't due to the cyber attack and of course, we're watching that closely.
Linda Rendle: And so we've typically fared well, and we continue to see that we are doing well with low-income consumers. And we haven't seen a material trade to private label that isn't due to the cyber attack, and of course, we're watching that closely, you know, as we get our distribution and our merchandising back, but we largely believe private label's growth is due to the fact that we weren't on the shelf. And, you know, we're seeing in Q3, their share was lower than it was in Q2.
Speaker Change: As we get our distribution on our merchandising back, but we largely believe private labels growth is due to the fact that we went on the shelf and you know we're seeing Q3 their share was lower than it was in Q2, we're seeing all the right indicators are households are coming back that might've tried private label during that time, when we were off the shelf.
Linda Rendle: We're seeing all the right indicators, our households were coming back that might have tried private label during that time when we were off the shelf. So we're watching all income tiers, always focused on low income, but that was a very general comment to say that all consumers are under more pressure and are certainly evaluating other behaviors and how they're spending their wallets. And then when it comes to our spending plans, you know, we had always anticipated that we would return to pre-pandemic merchandising levels before we even saw a more stressed consumer, because we just thought that was the right level of spending to ensure we were introducing people to new innovation, making sure that we're capturing new behaviors in times where consumers are open to that, for example, when they send their kids back to school, or when they send the kids to college.
Speaker Change: So we're watching all income tiers always focused on low income, but that was a very general comment to say that all consumers are under more pressure and are certainly evaluating other behaviors and how they are spending their wallet and then when it comes to our spending plans.
Speaker Change: We had always anticipated that we would return to pre pandemic merchandising levels before we even saw more stress consumer because we just thought that was the right level of spending to ensure we were introducing people to new innovation, making sure that we're capturing new behaviors and times, where consumers are open to that for example, when they send their kids back to school.
Speaker Change: Oh, when they send their kid to college, and so we'd always anticipated that and this promo though does also support our return to share growth and a return from a distribution perspective. So we liked it that it works.
Linda Rendle: And so we'd always anticipated that. And this promotion, though, does also support our return to share growth and our return from a distribution perspective. So we like that it works doubly hard for us, but I wouldn't say we're doing this because of our recovery from cyber.
Speaker Change: Doubly hard for us, but I wouldn't say, we're doing this because of our recover from cyber cyber we just always anticipated that the merchandising level return.
Anna Jeanne Lizzul: We just always anticipated that this retail level would return. And then, from an advertising and sales promotion standpoint, we did increase that this year because we saw a pressured consumer and wanted to make sure that we were communicating our superior value, et cetera. But these are all within the range of normal spending for us in a given year. You know, we typically spend around 10% on advertising and sales promotion. It'll be closer to 11% this year,
Speaker Change: And then from an advertising and sales promotion level, we did increase that this year, because we saw a pressure pressured consumer and wanted to make sure that we were communicating our superior value et cetera.
Speaker Change: But these are all within the range of normal spending for us in a given year, we typically spend around 10% in advertising and self promotion it'll be.
Speaker Change: Closer to 11% this year and we're returning to a level of reduced revenue spending that we've had in the past. So we don't see any need to go further or deeper than that we feel like we have the right level, but this really is about more normal course of business on it is that we're seeing consumer behaviors that we need to react to.
Anna Jeanne Lizzul: And we're returning to a level of reduced revenue spending that we had in the past. So we don't see any need to go further or deeper than that. We feel like we have the right level, but this really is about the more normal course of business than it is, you know, that we're seeing consumer behaviors that we need to react to.
Speaker Change: Okay. That's very helpful. Thank you.
Anna Jeanne Lizzul: Okay, that's very helpful. Thank you.
Speaker Change: Our next question comes from Javier Escalante of Evercore ISI. Your line is open.
Operator: Our next question comes from Javier Escalante of Evercore ISI. Your line is open.
Javier T. Escalante Manzo: Good afternoon, everyone. Thank you for the question I actually have two one is if you could.
Javier T. Escalante Manzo: Good afternoon, everyone. And thank you for the question. I actually have two.
Javier T. Escalante Manzo: One is, if you could, on the commentary when it comes to market share and household penetration. It feels as if you are always referring back to the cyber attack, but if I understand the trajectory correctly, there were also market share losses relative to, say, pre-pandemic because of the supply chain issues that you mentioned. So, if you can comment on whether the intent is to restore market share to pre-pandemic levels in these highly contested categories like pet litter and trash bags. And then I have a follow-up.
Javier T. Escalante Manzo: On the commentary when it comes to market share and household penetration.
Javier T. Escalante Manzo: It feels as if you are referring always back to the cyber attack.
Javier T. Escalante Manzo: So you understand the trajectory correctly.
Javier T. Escalante Manzo: There was also a market share losses.
Javier T. Escalante Manzo: To say pre pandemic because of the supply chain issues that you mentioned so if you can comment on.
Javier T. Escalante Manzo: Whether the intent is to restore.
Javier T. Escalante Manzo: Market share to pre pandemic levels.
Speaker Change: These highly contested categories like Tech leader talks about us and then I have a follow up.
Speaker Change: Sure Javier.
Linda Rendle: Sure, Javier. I mean, it has certainly been a complex last few years, with lots of puts and takes. And so what I would comment on is, you know, we intend to grow market share; that is our mid to long-term goal, and that is the bar we hold for ourselves to say if we're winning with the consumer or not. Clearly, given the cyber attack, we have not grown market share this year, but we're seeing the trend move in the right direction.
Speaker Change: Been a complex last few years and lots of puts and takes and so what I would comment on is we intend to grow market share that is our mid to long term goal and that is the bar, we hope hold for ourself to say, if we're winning with the consumer are not.
Speaker Change: Clearly given the cyber attack, we have not grown market share this year, but we're seeing the trend move in the right place. So for perspective, we lost about five points of share.
Linda Rendle: So, you know, for perspective, we lost about five points of share. Nearly a third of our market share during the low point from a cyber perspective. And we're back down. We ended the quarter down about three quarters of a point.
Speaker Change: <unk>.
Speaker Change: Nearly a third of our market share during the low point from a cyber perspective, and we're back down you know we ended the quarter down about three quarters of a point we've made progress since there if you look at the weekly data.
Linda Rendle: We've made progress since then, if you look at the weekly data, but what we first need to do is restore market share and then grow from there. And we believe we have the right plans to do that. If you look at many of our businesses, they're volatile versus the market share they had in the past, but in aggregate, we mostly returned, and some businesses were higher. For example, in our cleaning business, we made significant progress in market share even though we had a COVID blip.
Speaker Change: But what we first need to do is restore market share and then grow from there and we believe we have the right plans to do that.
Speaker Change: If you look at many of our businesses, they're variable versus the market share they had in the past, but in aggregate, we mostly returned and some businesses were higher for example on our cleaning business. We made significant progress on market share, even though we had COVID-19 blips and then of course.
Linda Rendle: And then, of course, you know, multiple rounds of pricing, and our brands have held up really well. So my evaluation would be, you know, heading into the cyber event, we were in the right place from a market share perspective, and we had plans to grow market share. Cyber has unfortunately caused another place where we took a step back and we have to rebuild, but I'm confident in our ability to return. And then we're working on plans in fiscal year 25 and beyond to deliver that market share growth we aspire to.
Speaker Change: Multiple rounds of pricing.
Speaker Change: Our brands have held up really well so my valuation would be.
Speaker Change: Heading into the cyber event, we were in the right place from a market share we had plans to grow market share.
Speaker Change: <unk> has unfortunately caused another place where we took a step back and we have to rebuild but I'm confident in our ability to return.
Speaker Change: And then we're working on plans in fiscal year, 'twenty, five and beyond to deliver that market share growth, we aspire to.
Javier T. Escalante Manzo: Thank you. And then the follow-up, and it's a little bit in the line of Chris's question. It seems rare that you see in consumer businesses, and it could be accounting, that you have negative pricing and negative volumes at the same time in the quarter. What gives you confidence that you didn't take too much pricing and the value players are gaining share in trash bags and pet leader, and I believe most recently in white that you don't need to reset prices into 2025. Yeah, you know.
Speaker Change: Thank you and then the follow up I know, it's a little bit.
Speaker Change: In the line of Chris's question.
Speaker Change: Rarely you've seen consumer businesses.
Speaker Change: Could be accounting that you have negative pricing and negative volumes at the same time.
Speaker Change: In the quarter.
Speaker Change: So.
Speaker Change: What gave you.
Speaker Change: Confidence that Judy didn't take too much pricing.
Speaker Change: The volume play yourself gaining share in trash bags.
Speaker Change: Great leader and I believe most recently in white.
Speaker Change: Need to reset prices.
Speaker Change: 2025.
Speaker Change: Yeah, you know I would say first of all there is a price fixed in a trade component of Q3, and certainly Kevin can walk through that in more detail.
Linda Rendle: Yeah, you know, I would say first of all, there's a price mix and a trade component to Q3, and certainly Kevin can walk through that in more detail. But if I just take a step back and say, what were the dynamics in Q3 that gave us confidence, and what were the dynamics that negatively impacted us, you know, it's pretty clear.
Speaker Change: But if I just take a step back and say what were the dynamics in Q3 that gave us confidence and what were the dynamics that negatively impacted us.
Speaker Change: Really clear, we weren't able to fully supply on a couple of those businesses that you mentioned gladden letter in particular and that means we werent fully available for the consumer which we don't like but.
Linda Rendle: We weren't able to fully supply on a couple of those businesses that you mentioned, GLAD and Litter in particular. And that means we weren't fully available for the consumer, which we don't like. But the good news is, as I've said, we recovered that ability to supply by the end of Q3, and we feel good heading into Q4. And also, there were more competitive dynamics, given the fact that we couldn't fully supply
Speaker Change: But the good news is like as I've said.
Speaker Change: Recovered that ability to supply by the end of Q3, and we feel good heading into Q4.
Speaker Change: And also they were more competitive dynamics given that fact that we couldn't fully supply we saw more merchandising from competitors et cetera.
Linda Rendle: We saw more merchandising from competitors, etc. As it specifically relates to private label, you know, if you look, there was a stressed consumer prior to the cyber events, and we didn't have any material lost to private label and share during that time. Nor have we, in any recessionary time, lost any material share to private label.
Speaker Change: As it specifically relates to private label. If you look there was a stressed consumer prior to the cyber events and we didn't have any material loss to private label on share during that time, nor have we and any recessionary time lost any material share to private label.
Linda Rendle: We offer brands with great value. We offer innovation. The consumer trusts us. They love our products. They love our brands, and we spend behind those brands to ensure that they understand the superior value we deliver. And we see that beginning to take hold and work in Q3 as we restore distribution and inventories. We saw private label share come down versus Q2 and heading in the right direction back to, you know, what we would expect it to be in a more normalized environment.
Speaker Change: We offer brands with great value, we offer innovation the consumer Trust us.
Speaker Change: Our products they love our brands and we spend behind those brands to ensure that they understand the superior value, we deliver and we see that beginning to take hold and work in Q3 as we restore distribution in inventories we saw private label share come down versus Q2 and heading in the right direction back to what we would expect it to be in a more normalized environment, we expect to continue to make.
Linda Rendle: We expect to continue to make progress as we restore distribution in Q4. So, I think it would be pretty understandable to say that when you're not fully on the shelf and you don't have all your distribution, a consumer is going to choose what's on the shelf. And they did. But we felt confident in our brands, confident in our spending plans, that we'd restore that. And history would tell us that when we were out of stock in COVID, that happened.
Speaker Change: Yes.
Speaker Change: As we restore distribution in Q4, so I think it would be pretty understandable to say when youre not fully on the shelf and you don't have all your distribution are consumers going to choose what's on the shelf and.
Speaker Change: And they did and but we feel confident in our brands content and our spending plans that will restore that back and history would tell us when we were out of stock in Covid that happens when we've had <unk>.
Linda Rendle: When we've had, you know, product issues where we're out of shelf on time for sale, we came back. We restored our share and distribution. We have a long history of doing this, and I remain confident in our ability to do it in Q4.
Speaker Change: Product issues, where we're out of shelf on Titanfall, we came back we restored our share in distribution with a long history of doing this and I remain confident in our ability to do it in Q4 and beyond.
Speaker Change: Thank you very much.
Speaker Change: Thanks Javier.
Speaker Change: Our next question comes from Filippo from morning Citigroup.
Operator: Our next question comes from Filippo Falorni of Citigroup. Your line is open.
Filippo: Your line is open.
Filippo Falorni: Hey, good afternoon, guys. I first wanted to ask about recovery from a shelf space standpoint. In the prior earnings call, you sounded very confident that you're going to recover the full amount of the TDP, that you still haven't recovered the distribution points. Is that still the expectation? And in the quarter, and in the year, I mean, and was the weakness in the quarter, like, does that change a bit of the full year expectation versus what you had expected, particularly for GLAAD and for the Cal Air business?
Filippo: Hey, good afternoon guys.
Filippo: First wanted to ask on the recovery from a shelf space standpoint.
Filippo: In prior earnings call you sounded very constantly using a recovered pool of the TDP, though you still hasn't recovered and distribution points is that still the expectation and in the quarter ended the year end.
Filippo Falorni: Thank you.
Filippo: And was the weakness in the quarter like does that change would be the full year expectation.
Filippo: What do you expect that particularly for glass and Florida Cat litter business. Thank you.
Speaker Change: Thanks, Filippo we fully expect to recover in Q4 or the distribution against our plan that we have for fiscal year 'twenty four that we lost we view that as temporary.
Linda Rendle: Thanks, Filippo. We fully expect to recover in Q4 the distribution against our plan that we had in fiscal year 24 that we lost. We view that as temporary. And we have seen the shelf decisions from retailers. They are now in the process of converting their sets, you know, as we speak in some of our categories, and some will happen throughout the quarter. So we have strong confidence that we will restore that distribution.
Filippo: And we have seen the shelf decisions from retailers. They are now in the process of converting their sets as we speak in some of our categories and some will happen throughout the quarter.
Filippo: So we have strong confidence that we will restore that distribution and that really was not the Q3 story because we always knew most of that that distribution would come back in Q4.
Linda Rendle: And that really was not the Q3 story because we always knew most of that that distribution would come back in Q4. You know, that's really more of a supply and service level issue story in Q3. And again, we have fully recovered from that.
Filippo: Really more of a supply and service level issue story in Q3, and again, we are fully recovered from that and we're heading into Q4 and a great place, where we're able to fully supply that distribution that we that we will recover I'd also just note I did a recent road show with all of our top retailers and.
Linda Rendle: And we're heading into Q4 in a great place; we're able to fully supply that distribution that we will recover. I'd also just note, you know, I did a recent roadshow with all of our top retailers. And, you know, they want our business pack on the shelf too because we are the brand that leads their categories. They're very invested in growing with us. Our conversations were focused on, you know, growing, moving forward, our innovation plans, you know, what we want to do to unlock our joint digital plans.
Filippo: You know they want our business tack on shelf to we are the brand that lead their categories, they're very invested in growing with us our conversations we're focused on growing moving forward our innovation plans.
Filippo: You know what we wanted you to unlock our joint digital plans now that we've well underway on our digital transformation now that we know of 100 million consumers. How can we personalize better to them. The conversations were very growth oriented future focused and they're looking forward to having our full distribution back as well so that we can grow their categories.
Linda Rendle: Now that we're, you know, well underway with our digital transformation, now that we know 100 million consumers, how can we personalize better for them? The conversations were very growth-oriented, future-focused, and they're looking forward to having our full distribution back as well so that we can grow their category.
Linda Rendle: That's helpful. And then maybe, Linda, just a longer-term question. I remember when you updated your long-term outlook to 3 to 5 from 2 to 4, a component of that higher outlook was international business. Obviously, you made a decision to divest Argentina, so maybe you can review what's left in international business and how that contributes to your long-term target. Thank you.
Speaker Change: Got it that's helpful and then maybe Linda just a longer term question.
Linda: I remember when your data your long term outlook to three to five from two to four a component of that and how your outlook was international business.
Linda: Obviously, you made the decision to divest in Argentina. So maybe you can review.
Linda: Lastly, in the international business and how does that contribute to your long term targets.
Speaker Change: Thank you.
Speaker Change: Sure.
Linda Rendle: Sure. You are absolutely right that we talked about international being a portion of that growth. And if you look at the performance of international over the last couple of years, it certainly has played a role where it's grown faster. But we also talked about having a more consistent, less volatile business. And Argentina was a high source of volatility and variability, and certainly you saw the FX impact play out.
Speaker Change: You are absolutely right that we talked about international being a portion of that growth and if you look at the performance of our international over the last couple of years that certainly has played a role where it's it's grown faster.
Speaker Change: We also talked about having a more consistent consistent less volatile business in Argentina was a highest tourists of volatility and variability.
Speaker Change: And certainly you saw the FX impact play out and you heard Kevin talk about what we expect moving forward.
Linda Rendle: And you heard Kevin talk about what we expect moving forward. So that was definitely on our minds to reduce the volatility and variability that we had and then be able to grow from a very solid base. And you might recall that a few years ago, we purchased the majority ownership of a JV partnership we have in the Middle East. It was a good example of looking at markets that we could grow faster in, that were more stable and predictable, and that has played out very well. We continue to have a really healthy consumer there, and innovation is working well in that marketplace. And so, what I would say is it's very consistent with what we've said before.
Speaker Change: So that was definitely on our minds to reduce the volatility and variability that we had and then be able to grow from a very solid base.
Speaker Change: And you might recall from a few years ago, we had purchased the the majority ownership of a JV partnership we have in the Middle East was a good example of looking at markets that we could grow faster and that we're more stable and predictable and that has played out very well. We continue to have a really healthy consumer there are innovation is working well in that marketplace.
Speaker Change: So what I would say is it's very consistent with what we've said before we have continued business in Latin America that we feel good about and will continue to grow business in Asia Europe, the middle East.
Linda Rendle: We have continued business in Latin America that we feel good about and will continue to grow. Business in Asia, Europe, the Middle East. And we continue to have growth pockets in businesses like litter, etc. Our cleaning business, which is the majority of our business, is international. And we continue to expect international business to be a strong contributor, but it will be much more profitable and stable versus what it was before.
Speaker Change: And we continue to have growth pockets on businesses like litter et cetera are cleaning business, which is the majority of our business is international and we continue to expect international will be a strong contributor, but it'll be much more profitable and stable versus what it was before.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Lauren Lieberman of Barclays.
Operator: Our next question comes from Lauren Lieberman of Barclays.
Lauren R. Lieberman: Your line is open.
Lauren R. Lieberman: Great. Thanks.
Lauren R. Lieberman: Great, thanks. Just a couple things. First, in the release, you specifically called out that part of the increase in gross margin was a more favorable outlook for raw material costs or for input. So just a little bit of color there.
Lauren R. Lieberman: Just a couple of things. So first is just in the release you specifically called out that part of the increase the gross margin outlook was a more favorable outlook for raw material costs are for input. So just curious to know a little bit of color. There and then secondly was thinking about Argentina, I know, we're not going to do.
Lauren R. Lieberman: And then secondly, I was thinking about Argentina. I know we're not going to do business planning guidance for 25. But just thinking about when you laugh. Argentina, Like Argentina has such a huge impact, for example, on gross margins, even this quarter, last quarter, do we like reverse that? Or is it just that the impact disappears because the business is gone? I'm just kind of thinking ahead. Again, not about the totality of gross margin but just how to think about the absence of Argentina moving forward and the margin impact on the business.
Lauren R. Lieberman: <unk> business plan and guidance for 25, but just thinking about.
Lauren R. Lieberman: When you lap.
Speaker Change: Argentina.
Speaker Change: Like Argentina FX at such a huge impact for example on gross margin even this quarter last quarter do we like reverse that or is it just the impact disappear because the business has gone I'm just kind of thinking ahead.
Speaker Change: And not about the totality of gross margin, but just how to think about the absence of Argentina, moving forward and the margin impact on that on the business.
Speaker Change: Yeah, we're happy to take those as it relates to gross margin can start there and kind of what we're seeing from a cost perspective, we are.
Kevin B. Jacobsen: Yeah, Lauren, happy to take those. As it relates to gross margin, we start there and kind of look at what we're seeing from a cost perspective. We are seeing cost continue to moderate. I think, as you saw in Q3, it's a fairly small impact, particularly if you look at commodity. We are seeing some commodities become deflationary. You see that a bit in soybean oil, which is something we use in our food business. You're seeing it in other categories, substrates, some chemicals. We are still seeing some cost increases, particularly on petroleum-based products. Solvents, Diesel, and Resins all add up just a little bit.
Speaker Change: Are seeing costs continue to moderate I think as you saw in Q3 is a fairly small impact, particularly if you look at commodities.
Speaker Change: We are seeing some commodities become deflationary is you've got a big soybean oil, which is something I'm using our food business youre seeing at other categories substrates some chemicals.
Speaker Change: We are seeing still some cost increases, particularly on petroleum based products.
Speaker Change: <unk> D.
Speaker Change: Diesel.
Speaker Change: That's up just a little bit more supply demand driven more than input costs. So I'd say it is definitely going in the right direction. It's a fairly modest hit for us in Q3 and that has certainly been an ongoing improvement.
Kevin B. Jacobsen: That's more supply-demand driven than input costs, so I'd say it is definitely going in the right direction. It's a fairly modest hit force in Q3, and that's certainly been an ongoing improvement. I'd say on the other piece of inflation, which is more wage-driven, it's generally playing out as we expected. That tends to show up in manufacturing and warehousing. We're still seeing ongoing inflation there, but on the commodity front, it is certainly, and as we step out of Argentina, which is a source of inflation, I expect it to be fairly benign by the time I get to Q4 on the commodity side, and then we'll continue to deal with wage inflation.
Speaker Change: The other piece of inflation, which is more wage driven is generally playing out as we expected that tend to show up in manufacturing and warehousing.
Speaker Change: We're still seeing ongoing inflation, there, but on the commodity front. It is certainly using <unk>.
Speaker Change: And as we step out of Argentina, which is a source of inflation I expect it'll be fairly benign by coming into Q4 on the commodity side and it will continue to deal with the wage inflation.
Kevin B. Jacobsen: And then another thing about Argentina next year, I think you said exactly right, is that as we move forward, a number of the areas you talked about will not have that impact going forward. So let me give you an example.
Speaker Change: And then how to think about Argentina next year I think you said exactly right is as we move forward a number of the areas you've talked about you will not have that impact going forward. So let me give you an example.
Kevin B. Jacobsen: You highlighted FX this quarter. To your point, it was about a 180 basis point hit to margin, and that was almost entirely Argentina.
Speaker Change: Highlighted FX this quarter to your point it was about 180 basis point hit to margin that was almost entirely Argentina as I look forward, even starting in Q4, we should have almost no FX hit to gross margin. So you get that benefit but keep in mind that will be offset by other areas things like pricing the pricing you're seeing in Q3.
Kevin B. Jacobsen: As I look forward, even starting in Q4, we should have almost no FX hit on gross margin, so you'll get that benefit. But keep in mind, that will be offset by other areas, things like pricing. The price in Houston in Q3 was primarily Argentina.
Speaker Change: Its primary Argentina that will also go away. So youll strip all that out ultimately the net impact of all of that is Argentina was a margin dilutive business for us so by stepping out of that all the different lines. When you. When you look at it in totality our margins will go up as a result of exiting Argentina, but youll strip out each one of those elements that Argentina drove.
Kevin B. Jacobsen: That will also go away. So you'll strip all that out. Ultimately, the net impact of all that is Argentina was a margin-diluting business for us. So by stepping out of that, all the different lines... When you look at it in totality, our margins will go up as a result of exiting our state. But you'll strip out each one of those elements that are.
Lauren R. Lieberman: Okay, and that impact from Argentina from the exit into just going back, it's actually, it's a pretty small business. It's a small net impact when you put all these pieces back together on the year-over-year margin, like, you know, in this quarter next year, for example.
Speaker Change: Okay, and then and that impact from Argentina from the exit into just going back to it's actually it's a pretty small business.
Speaker Change: A small net impact when you put all these pieces back together on the year over year margin like you know in this quarter next year for example.
Kevin B. Jacobsen: Yeah, that's right. I mean, the business is 2% of sales, and you can probably do the math pretty quickly. It's a very dilutive business to us when we own it, and it represents 2% of our sales. So you can probably do the math. You can see there's some modest benefit to our gross margin going forward now that it's out of the port.
Speaker Change: Yeah, that's right I mean, you look at the business, it's 2% of sales and you can probably do the math pretty quickly. It's a very dilutive business to us when we own it represents 2% of our sales. So you can probably do the math you can see there's some modest benefit to our gross margin going forward notes out of the portfolio.
Speaker Change: Okay, Great and then one thing I just want to clarify I think I figure it out as the cold weather, but there were two conflicting statements and the in the release and the prepared remarks about you know.
Lauren R. Lieberman: Okay, great. And then one thing I just want to clarify. I think I figured it out as the call went on, but there were two conflicting statements in the release and in the prepared remarks about, you know, dealing with supply chain constraints being a problem in the quarter but having resumed normal service levels. So I didn't know if it was a timing difference, like normal service levels as you exit the quarter were constrained by the supply chain during the quarter. I just wanted to make sure it was clear how those two statements fit together.
Speaker Change: The supply chain constraints being a problem in the quarter, but having resumed normal service levels. So I didn't know if it was a timing difference like normal service levels as you exit the quarter.
Speaker Change: But constrained by supply chain during the quarter I just wanted to make sure I'm clear on how those two statements that together.
Lauren R. Lieberman: That's right, Lauren. So we were not able to fully service our retailers throughout Q3 until the end. So at the end of Q3, we restored normal service levels, and we entered Q4 with them back to being normalized. And that ties in with the supply chain comment that we had some constraints, which impacted those service levels throughout the quarter.
Speaker Change: That's right Lauren So we were not able to fully service our retailers throughout Q3 until the end. So at the end of Q3, we've restored to normal service levels, and we entered Q4 with that back to being normalized and that marries with the supply chain comment that we had some constraints, which impacted those service levels throughout the quarter.
Speaker Change: Okay, alright, thanks, so much.
Lauren R. Lieberman: Okay. All right. Thanks so much.
Speaker Change: Thanks Lauren.
Speaker Change: Our next question comes from Olivia Tong of Raymond James Your line is open.
Operator: Our next question comes from Olivia Tong of Raymond James. Your line is open.
Olivia Tong: Great, thanks. I wanted to ask you two questions about the margins. First on gross margin, obviously, the EPS outlook for this year is now higher than where you were pre-cyber attack, and much of that's due to the gross margin expansion, about 100 basis points ahead of where you thought you were going to be at the beginning of the year. In the past, you've talked about 200 basis points of gross margin improvement annually as you recover from the post-COVID decline.
Olivia Tong: Great. Thanks.
Olivia Tong: Wanted to ask you.
Olivia Tong: Two questions around margins. The first one on gross margin obviously, the EPS outlook for this year is now higher than where you were pre cyber attack and much of that is due to the gross margin expansion of about 100 basis points ahead of where you thought you were going to be at the beginning of the year. So in the past you've talked about 200 basis points of gross margin improvement annually as you recover from.
Olivia Tong: The post Covid decline. This year now 275 last year, obviously, a lot more than that despite all the ups and downs with the cyber attack. So can you just talk about you know ex Argentina exercise or all these things the ability to keep output.
Olivia Tong: This year, now 275. Last year, obviously a lot more than that, despite all the ups and downs with the cyber attack, outperforming on gross margin. What you learned from this year and last year, what capabilities continue versus some of the one-offs that are helping and hurting this year, just sort of the ongoing recovery on gross margin relative to, you know, the post-COVID timing.
Olivia Tong: Outperforming on gross margin what did you learn from this year last you know what capabilities continue versus some of the one off that are helping and hurting this year just sort of the ongoing.
Olivia Tong: Recovery gross margin relative to the post COVID-19 timing things.
Kevin B. Jacobsen: Sure, Olivia; happy to take that one. As you think about gross margin, and you almost have to separate what we've been doing for the last several years in terms of where I think this is going longer term, you know, we're still working to recover from a record level of inflation that we've had to absorb, and as I think you quite well know, we lost about 800 basis points in gross margin.
Speaker Change: Sure I'd be happy to take that one as you think about gross margin and you almost have to separate what we've been doing for the last several years in terms of where I think it's going longer term.
Speaker Change: We're still working to recover from the record level of inflation that we've had to absorb them.
Speaker Change: I think you know quite well Olivia we lost about 800 basis points in gross margin.
Kevin B. Jacobsen: And as Lynn and I both talked quite a bit, we remain committed to fully recovering that. To your point, with the work we did last year and the work we're doing this year, we'll get about 650 basis points. We'll recover.
Speaker Change: Ladies and recycle.
Speaker Change: One and I've talked quite a bit we remain committed to fully recovering that to your point with the work. We did last year. The work. We're doing this year, we will get about 650 basis points will recover we've got more work to do and feel quite confident we'll get there.
Kevin B. Jacobsen: We've got more work to do and feel quite confident we'll get there. You know, the process to get there, we were leading into pricing, we took four rounds of pricing, which is very consistent with what you saw broadly in our industry to recover from this inflation. As we move forward, though, now, and get back into what I describe as, we believe, a more normalized cost environment, typically, our cost savings efforts is more than enough to cover normal levels of inflation and allows a little bit extra that we can either invest back in the business, take to the bottom line to further expand even margins, and that's where that long-term goal of 25 to 50 basis points was generated, which is normal level of cost inflation, which for us tends to be about $75 million a year.
Speaker Change: The process to get there we were leading into pricing. We took four rounds of pricing, which is very consistent what you saw broadly in our industry to recover from this inflation.
Speaker Change: As we move forward, though now and get back into what I described is we believe a more normalized cost environment typically our cost savings efforts is more than enough to cover normal levels of inflation and allows a little bit extra and we could either invest back in the business pay to the bottomline to further expand EBIT margins.
Speaker Change: That's where that long term goal of 25 to 50 basis points was generated which is normal level of cost inflation, which for us tends to be about $75 million a year.
Kevin B. Jacobsen: Our cost savings more than covers that, and we use the extra to modestly improve margins each year. That's where we're going. We're not there yet. We're still working on recovering from the inflationary cycle. Now, we're still pricing, but it's certainly moving in the right direction. So, we'll get back to fully recovering these gross margins over time, and then I expect, assuming that the commodity environment gets to that more normalized level, that's how you should expect to see us continue to grow margins over the long term, with our margin transformation efforts more than offsetting regular levels of inflation.
Speaker Change: Cost savings more than covers that and we use the extra it up modestly improve margins each year.
Speaker Change: That's where we're going we're not there yet we're still working on recovering from the inflationary cycle and that was through pricing, but it's certainly moving in the right direction. So we'll get back to a fully recovering these gross margins overtime.
Speaker Change: And assuming that the commodity environment is that more normalized level. That's how you should expect to see us continue to grow margins over the long term is our margin transformation efforts more than offsetting regular levels of inflation.
Speaker Change: Got it and then just a point of clarification on your call for higher advertising in the second half.
Olivia Tong: Got it. And then just a point of clarification on your call for higher advertising in the second half; are you talking about higher as a percentage of sales sequentially or that the year-over-year change in the second half is higher than it was in the first half? And how much of that is due to the clear pullback in spend in the first half when you're out of stocks versus just a desire to, you know, you have greater programs, greater opportunity to support some of the innovation?
Speaker Change: Are you talking about higher as a percentage of sales sequentially or that the year over year change in second half is higher than it was in first half and.
Speaker Change: How much of that is due to the clear pullback in spend in the first half when when you had your out of stocks.
Speaker Change: Versus just a desire to.
Speaker Change: Yeah, greater programs greater opportunity to support some of the innovation. Thank you.
Olivia Tong: Sure Olivia.
Linda Rendle: Sure, Olivia, if we wind the clock back to the beginning of the fiscal year, we actually had intended to spend more money on advertising and sales promotion. In our original guidance, we said about 11%. We still intend to do that.
Olivia Tong: Thank you. Sure, Olivia, if we
Speaker Change: Wind the clock back to the beginning of the fiscal year, we actually had intended to spend more money in advertising and sales promotion in our original guidance, we set about 11%, we still intend to do that but youre absolutely right that given the cyber attack the shape of that over this course of the year has changed so we spent less.
Linda Rendle: But you're absolutely right that given the cyber attack, the shape of that over this course of the year has changed. So we spent less in the front half of the year; we're spending more in the back half, still with the intention of spending, what we're saying now is over 11% of sales. I want to be clear on the dynamics there, though.
Speaker Change: In the front half of the year, we're spending more in the back half, but still with the intention of spending what we're saying now is over.
Speaker Change: Over 11% of sales I want to be clear on the dynamics there, though it is about we're spending about the same money we had intended but given what we've talked about from a sales outlook perspective, and Argentina. It would put us above 11%, but we're still spending about the same amount of money.
Linda Rendle: It is about whether we are spending about the same amount we had intended. But given what we've talked about from a sales outlook perspective and Argentina, it would put us above 11%. But we're still spending about the same amount of money as we intended to when we first gave that guidance. But again, this was more about supporting our brands as consumers were more challenged. We felt good about our innovation plans, and we wanted to put money behind them. And again, just the shape of the year has changed given the cyber event.
Speaker Change: We intended to.
Speaker Change: When we first gave that guidance, but again this was more about supporting our brands as consumers are more challenged we felt good about our innovation plans and we wanted to spend behind them and.
Speaker Change: And again, just the shape of the year has changed given the cyber events.
Speaker Change: Great. Thank you great. Thank.
Speaker Change: This concludes the question and answer session. This Randall I would now like to turn the program back to you.
Linda Rendle: This concludes the question and answer session. Ms. Rendle, I would now like to turn the program back to you.
Randall: Thanks, So much everyone. We look forward to updating you on our continued progress on our next call until then stay well.
Linda Rendle: Thanks so much, everyone. We look forward to updating you on our continued progress on our next call. Until then, stay well. This concludes.
Speaker Change: This concludes today's conference call. Thank you for attending.
Operator: This concludes today's conference call.
Speaker Change: Yeah.
Operator: The host has ended this call. Goodbye.
Speaker Change: The host has ended this call goodbye.
Operator: Today's conference call.
Speaker Change: Today's conference call.
Speaker Change: Thank you for attending.